Macro guru Lyn Alden is naming two big underlying foundations that are kicking the trend of de-dollarization into high gear.
In a recent interview on The Jay Martin Show, Alden says one reason why de-dollarization is accelerating is that other countries have lost trust in US government bonds.
According to the macro guru, the yields offered by US treasuries are lower than inflation, which motivated a number of countries to invest elsewhere.
“This past year you’ve seen a little more acceleration in de-dollarization, and there are, I think, two big underlying foundations for that.
So number one is that ever since the global financial crisis and a few years after that, a number of countries decided that (US) treasuries are probably not going to be attractive. And they don’t want to finance the US government at negative real yields.
For much of the 2010 decade, for example, T-bills were yielding less than inflation. Longer-duration treasuries were yielding roughly in line with CPI (consumer price index)… And they were underperforming other assets like equities and real estate and things like that.
So a lot of these governments said, ‘We don’t really want to facilitate that.'”
Alden also says that countries are moving away from the dollar out of fear that the US government may seize their reserves at any point.
According to Alden, other countries know that the status of their dollar reserves is at the mercy of a few politicians in Washington.
“The treasury and the dollar market, in general, is a permissioned ledger. So it’s a ledger that you can be cut off from. Your assets can be unilaterally seized.
Obviously, it’s not done arbitrarily, but most countries around the world have had periods of time over the past 50 years where they’ve not been in the good graces of Washington (in) one way or another….
Basically, a lot of countries are saying, ‘Maybe, we shouldn’t have 100% of our reserves. Maybe, we should have 80% of our reserves in dollars and treasuries because a handful of people in D.C. can just snap their fingers and seize those funds.'”
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